Bachus considering Volcker alternatives

House Financial Services Committee Chairman Spencer Bachus is considering introducing legislation to make changes to the controversial Wall Street trading crackdown, known as the “Volcker rule,” and is soliciting feedback on what would be a less “burdensome” alternative to a proposal released by financial regulators last year.

The Alabama Republican warned Tuesday that the current version will deal “devastating” repercussions to the economy and said he’s anxious to hear from investors and other members of the public on how the rule should be changed.

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“It will undermine our nation’s ability to compete and make it harder for Main Street businesses to raise capital so they can grow and create jobs,” Bachus said in a statement. “Therefore, we must consider legislative alternatives that will not stifle economic growth and job creation.”

Ahead of a committee hearing later this year to consider alternatives to the rule, Bachus on Tuesday issued a Sept. 7 deadline for submitting recommendations.

The Volcker rule — which is named after former Federal Reserve Chairman Paul Volcker and bans banks that receive a federal backstop from making trades with their own funds — has drawn sharp criticism from Wall Street and has been one of the most heavily lobbied parts of the 2010 Dodd-Frank financial oversight law.

The crackdown will most directly impact large Wall Street banks such as Goldman Sachs and Morgan Stanley.

Republicans have been critical of the Volcker rule but until Bachus’s announcement, they had mostly focused their efforts on delaying its implementation.

There is little chance any proposal unveiled by Bachus this year would make it into law, but introducing legislation would afford House Republicans the opportunity to detail how they would change a key part of the Dodd-Frank law in advance of the November elections.

Opponents of the Volcker rule argue that proprietary trading was not one of the main causes of the financial crisis and that banning it will make it difficult for companies and local government to raise funds because banks’ role in the process will be restricted. Advocates of the Volcker rule say the measure will stop banks from making risky trades that could result in massive losses, which in turn could require another government bailout.

Sens. Carl Levin (D-Mich.) and Jeff Merkley (D-Ore.), who authored the Volcker rule language in Dodd-Frank, have been pushing regulators to make their October proposal tougher, arguing they have left too many possible loopholes for banks to exploit.

A final version of the Volcker rule was supposed to be completed last month but regulators missed that deadline. A final rule is expected later this year.

Last month, Federal Reserve Governor Sarah Bloom Raskin backed many of the arguments made by Volcker rule supporters. Raskin questioned whether banks trading with their own funds served any benefit to the broader economy and noted that financial firms outside of the banking industry, such as hedge funds, are capable of stepping in to markets where Wall Street banks have retreated and therefore make the overall impact of the trading crackdown negligible.

Readers' Comments (8)

The GOP wants to merge the banking and casino industries wherein banks engage in wholesale gambling with the funds of their depositors. The GOP also wants the US taxpayer to continue to underwrite the banks' gambling losses.

The GOP wants to merge the banking and casino industries wherein banks engage in wholesale gambling with the funds of their depositors. The GOP also wants the US taxpayer to continue to underwrite the banks' gambling losses.

VOTE THE GOP BUMS OUT.

Guy - clearly you have no understanding of either the financial system or politics. The Volker rule wasn't supposed to be approved. It was a poison pill the democrats added to make the republicans take the fall for squashing wall street reform. Republicans didn't bite. No one wants the rule. When they vote on alternatives, 90% of the house and nearly all of the senate will vote in favor of it and Obama will sign it - why? Because everyone knows it was not what was needed and the impacts are far more painful to the US economy than any protection it would have provided. Restore Glass - Steigal - but it is a must that the Volker rule needs to be squashed.

If you were really conservative - you would say vote all of them out as the "bums" comment could easily be applied on both sides of the isle. Lets at least try to raise the bar in these conversations.

So lets get this straight. The left is bashing Romney for Bain Capital yet they want the Volker rule which empowers companies like Bain. Guess what, if you don't like Bain and outsourcing then why would you like the rule that gift wraps companies in need of money to them?

What a crock of excrement. Every time we try to reel in the crooks in the financial services industry we hear about how devastating it will be for the economy. Yet history has shown that the only times we've had any devastation to the economy was when we let those crooks run out of control. The Great Depression, the Savings & Loan crisis, the Busch-era recession, ...and the list goes on. Wall Street needs to be put on a very tight leash with a pronged choke collar!